Weather extremes have forced higher-than-expected abandonment and prevented plantings in cotton fields from Texas to the Carolinas so far this spring.
If the result is a significantly reduced supply, look for a little buoyancy under cotton prices this summer, said market analysts speaking at the Ag Market Network’s June teleconference.
According to Carl Anderson, professor Extension specialist emeritus at Texas A&M University, much of the cotton in the Coastal Bend and south Texas region has been abandoned except for a small amount of irrigated cotton.
Last year, those two regions produced 350,000 bales of cotton even after the effects of hurricanes. The year prior, the two regions produced 783,000 bales of cotton. “We would have had over 350,000 acres planted in the area. I expect that the area has now lost most of its dryland cotton, which could reduce Texas production by 400,000 bales.”
Planting is wrapping up in west Texas, Anderson says. Traditionally, about 3 million acres are planted there, with about half irrigated. “We’ve had regional rains that have been good, but other regions have had no rain. A half-inch of rain on top of sand with the wind blowing doesn’t last very long. If seeds did germinate they’re still in deep jeopardy. I would think we’ve lost somewhere around 600,000 acres to 700,000 acres.
“If these figures hold true, dry weather would take nearly a million acres off the top of the 4.7 million acres Texas growers had intended to plant. “That’s not all that unusual for Texas except that Texas is a major player in the U.S. crop size,” Anderson said.
“It’s going to eventually have an impact on the market, even though many of the market players today don’t realize it. I think the Texas crop is going to fall very short this year. Total production might be in the vicinity of 5 million to 6 million bales.”
Meanwhile the Mid-South and Southeast crops “have been extremely wet,” said O.A. Cleveland, professor emeritus, Mississippi State University. “The window finally opened and we got the planting in, even though we didn’t plant everything we intended. We had a storm last week that gave us 4.9 inches of rain in one Delta county in 90 minutes. That’s been the story throughout the spring and early summer.
“We’ve probably lost 15 percent of our acreage to soybeans,” Cleveland said. “Arkansas lost a little more cotton acreage than did the rest of the Mid-South. Louisiana and Mississippi will probably come in around 300,000 acres of cotton each. The only state that had a bit of a comeback in cotton is Tennessee. We could be down as much as 75,000 acres from our intended acres in the Mid-South.”
Cleveland said cotton acreage in the Southeast could be down as much as 50,000 acres.
“All in all, we’ve had a very slow start. Research indicates that a late start would give us a smaller crop. But some of our biggest crops with record yields, came on crops planted very late.”
On prices, Mike Stevens, Swiss Financial Services, said, “The market has a dime upside potential and nickel downside potential, just based on speculative attitudes. With crop problems and a better economic outlook, add another nickel to the upside. If history repeats itself, summer rallies will provide short-term selling opportunities unless the fundamentals change dramatically.”
“We’re in an interesting situation,” Anderson said. “There are expectations that we will have a smaller supply of cotton. Down the road and particularly in 2009-10, we have to look at planted acreage, the speed of economic recovery and the level of U.S. exports.
On prices, Anderson said, “Supply and demand is saying that December 2009 will travel between 60 cents and 70 cents. If we get a weather shock, we could see December 2009 climb over 70 cents. If you look down the road at 2010, we’re already at 68 cents. If you move that up 10 cents, you’re at 78 cents. We are using up our cotton supplies.”
John Robinson, Extension economist Texas A&M, said December cotton could range between 55 cents on the low end and 65 cents on the high end. “But if the weather really starts getting bad and the funds really ramp up, I could see it going over 65 cents.”
“As important as Texas is to the U.S. crop this year, India is to the world crop,” Cleveland said. “The monsoon has been very slow in coming, but it is expected to move into full force. The world must watch that crop extremely close, because it could be so much larger. That’s the fundamental internationally that could pull the rug out from under our price forecast. At the same time, if that crop is not as big as it’s anticipated to be, it will free up prices to move higher.”